Deutsche Telekom Says T-Mobile Value Back to AT&T Deal Level

Since a failed disposal of the business to AT&T Inc. in 2011 for $39 billion, Deutsche Telekom has made T-Mobile the country’s fastest-growing wireless provider by merging it with MetroPCS Communications Inc., expanding its network and introducing cheaper and more flexible pricing plans. Photographer: Krisztian Bocsi/Bloomberg

Jan. 20 (Bloomberg) -- Deutsche Telekom AG has recouped its
investment in T-Mobile US Inc., with an increase of the unit’s
value compensating for a 7.4 billion-euro ($10 billion)
writedown on the asset in 2012, according to the German
company’s chief executive officer.

Timotheus Hoettges made the assessment in an interview with
Bloomberg News as Deutsche Telekom once again explores a
potential sale of its holding in the fourth-largest U.S.
carrier. Since a failed disposal of the business to AT&T Inc. in
2011 for $39 billion, Deutsche Telekom has made T-Mobile the
country’s fastest-growing wireless provider by merging it with
MetroPCS Communications Inc., expanding its network and
introducing cheaper and more flexible pricing plans.

“We already have increased the value to what it was at the
sale,” Hoettges said in Munich yesterday, where he was
attending the annual DLD conference for entrepreneurs and
technology companies. “That means with 67 percent of a company
that’s worth $42 billion, we’re already back at the value of the
AT&T deal.”

SoftBank Corp., seeking to combine its Sprint Corp. unit
with T-Mobile, has entered direct talks with Deutsche Telekom to
resolve obstacles to a potential deal, people with knowledge of
the matter said. T-Mobile has an equity value of $26 billion and
total debt of about $13.6 billion, according to data compiled by
Bloomberg.

Succeeding Obermann

Hoettges declined to comment on any discussions over a
potential sale of T-Mobile. The 51-year-old, who succeeded Rene
Obermann as Bonn-based Deutsche Telekom’s CEO this month, was
personally involved in negotiating the transactions with AT&T
and MetroPCS.

In 2012, shortly after the MetroPCS agreement, Deutsche
Telekom wrote down the value of its T-Mobile holding, reflecting
reduced earnings potential because of an exodus of customers at
the time.

T-Mobile CEO John Legere this month announced the best
quarter in eight years for the carrier, which added 869,000
monthly subscribers in the final three months of 2013. Since the
MetroPCS transaction was completed in May, T-Mobile’s stock has
doubled in U.S. trading.

Deutsche Telekom climbed 0.8 percent to 12.57 euros in
Frankfurt trading today. The former German phone monopoly has a
market value of 55.9 billion euros. T-Mobile closed at $32.51 in
New York on Jan. 17. The U.S. equity markets are closed today
for a holiday marking the birthday of civil rights leader Martin
Luther King, Jr.

SoftBank Financing

“The U.S. is a great story for me,” Hoettges said.
“Truly, when you think how things came together, then I’m
fairly proud -- together with all those involved -- of what we
created there.”

Deutsche Telekom wants an all-cash offer for T-Mobile, and
SoftBank is trying to finance a deal to provide as much cash as
possible, one of the people said. SoftBank founder and president
Masayoshi Son is seeking to borrow about $20 billion from banks
including Goldman Sachs Group Inc., Mizuho Bank Ltd. and Credit
Suisse Group AG, people said last month. Sprint would take on
any debt relating to the deal, one person said.

Merging Sprint and T-Mobile would create a strengthened
rival to Verizon Wireless and AT&T, but a deal may face
obstacles from regulators concerned about reducing the number of
national operators.

Cash Use

Hoettges said Deutsche Telekom’s favored use of cash is for
network spending, while a reduction of debt would be financed
from operating cash flow. The German carrier, with phone
networks across Europe, has earmarked spending of almost 30
billion euros in the three years through 2015.

Deutsche Telekom plans to apply for subsidies from the
European Union’s regional fund for expanding broadband coverage
in rural areas in Germany. EU Commissioner Neelie Kroes said
last week the fund would for the first time focus on providing
resources for network rollouts starting this year.

“We’ll apply for every project that gets tendered out
there,” Hoettges said. Deutsche Telekom would use the funds for
its almost 5,000 joint broadband projects with communities in
Germany for which it isn’t economical to roll out high-speed
connections, he said.